Stewart Information Services Corporation · NYSE:STC
Stewart Information Services — Investor Presentation (November 2013)
34 slides from Stewart Information Services's investor presentation, Nov 25, 2013
Slide 1: Winter 2013 Investor Presentation
Winter 2013 Investor Presentation Stewart Information Services Corporation
Slide 2: Forward-looking Statements
2 Forward - looking Statements Certain statements in this presentation are "forward - looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 . Such forward - looking statements relate to future, not past, events and often address our expected future business a
Slide 3: Non-GAAP Disclosures
3 Non - GAAP Disclosures This presentation may contain certain financial measures that are not presented in accordance with generally accepted accounting principles (GAAP), including but not limited to, losses and litigation expenses arising from non - predictable title losses and adjusted pretax ti
Slide 4: Investment Highlights
4 Investment Highlights • Trusted provider in $11 billion domestic industry • Well positioned to capitalize on the ongoing real estate recovery and heightened regulatory environment • Streamlined organizational structure and responsive corporate strategy to grow revenue, reduce fixed costs and enhan
Slide 5: Third Quarter 2013 Financial Highlights
5 Third Quarter 2013 Financial Highlights • Pretax earnings were $29.6 million, down from $39.4 million in prior year period • Net earnings attributable to Stewart were $15.4 million ($0.63 per share) down from $34.7 million ($1.45 per share) in the prior year period. Of note, the prior period benef
Slide 6: Income Statement (non-GAAP)
6 Income Statement (non - GAAP) 2013 2012 % Change Revenues Direct 198,970 190,233 4.6% Agency 306,583 281,587 8.9% Total Title Revenue 505,553 471,820 7.1% Mortgage Services 26,696 42,021 -36.5% Total Operating Revenues 532,249 513,840 3.6% Investment Income/Other Gains 4,586 6,901 -33.5% Total Rev
Slide 7: Balance Sheet
7 Balance Sheet September December 2013 2012 % Change Assets Cash & Cash Equivalents 192,359 196,471 -2.1% Cash & Cash Equivalents - Statutory Reserve Funds 8,779 12,067 -27.2% Investments - Statutory Reserve Funds 449,323 444,579 1.1% Investments - Short Term 37,274 37,025 0.7% Investments - Other
Slide 8: Summary Cash Flow Statement
8 Summary Cash Flow Statement September September 2013 2012 % Change Cash Flow Net Cash (Used) Provided by Operations 70,846 56,830 24.7% Proceeds (Purchases) of Investments, Net (46,045) (4,122) 1017.1% Purchase of Property and Equipment, Net (12,855) (9,113) 41.1% Cash Paid for Acquisitions of Sub
Slide 9: Title Insurance: Residential, Commercial, International
9 Title Insurance Residential • Provides independent, third - party closing and settlement services while acting as an advisor to parties in the real estate transaction • Searching, examining and insuring the condition of the title to real property, thereby providing security of ownership to homeown
Slide 10: Mortgage Services Business Lines and Strategy
10 Mortgage Services Business Lines • Mortgage origination services include post - closing management, loan review, valuation and due diligence • Component servicing business includes call center services, loss mitigation support, short sale and deed - in - lieu services as well as transfer support
Slide 11: Revenues and Pre-tax Earnings Trends
11 Revenues and Pre - tax Earnings Trends $ Millions Pre - tax Earnings Revenue ($1,500) ($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 2006 2007 2008 2009 2010 2011 2012 2013 YTD $(300) $(200) $(100) $- $100 $200 $300 $400 $500
Slide 12: Stewart Operating Revenues Trailing Twelve Months
12 Stewart Operating Revenues Trailing Twelve Months - $ Millions $0 $500 $1,000 $1,500 $2,000 $2,500 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Agency Title Mortgage Services
Slide 13: Direct Title Revenues and Orders
13 Direct Title Revenues and Orders Trailing Twelve Months - $ Millions Direct Title Revenue Orders Opened Orders Closed $500 $600 $700 $800 $900 $1,000 $1,100 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 200,000 400,000 600,000 800,000 1,000,000 Orders
Slide 14: Independent Agency Network
14 Independent Agency Network • Managing agency network by emphasizing quality and profitability over market share growth to reduce risk, improve performance and ensure our platform supports the needs of a changing customer and regulatory environment – Since 4Q 2008, average annual remittance per in
Slide 15: Agency Revenues net of Retention
15 Agency Revenues net of Retention Trailing Twelve Months - $ Millions Number of Independent Agents Note: Number of independent agencies based on number of contractual relationships rather than number of physical locations of agencies $100 $150 $200 '08 '09 '10 '11 '12 '13 2,500 3,500 4,500 5,500 6
Slide 16: Agency Retention Rates
16 Agency Retention Rates Differences in independent agency retention rates largely driven by geography Source: Form 9 filings for respective underwriters for year ended December 31, 2012. STC retention rates were used in the calculations because competitor rates are not included in SEC or statutory
Slide 17: Stewart Mortgage Services Revenues
17 Stewart Mortgage Services Revenues Trailing Twelve Months - $ Millions Note: Years prior to 2012 not restated for change in segment reporting effective with Q4 2012 reporting. Impact in any given year would not be material to revenues. $0 $20 $40 $60 $80 $100 $120 $140 $160 $180 '02 '03 '04 '05 '
Slide 18: Expenses As a Percent of Operating Revenues
18 Expenses As a Percent of Operating Revenues Other Operating Expenses Employee Costs Q3 2013 YTD 2013 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% STC FAF FNF 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% STC FAF FNF
Slide 19: Title Loss Provision Ratios
19 Title Loss Provision Ratios Quarterly Title Loss Provision Ratios – Includes Prior Year True - ups Source: Company press releases and SEC filings
Slide 20: Ultimate Loss Ratios by Policy Year
20 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 Ultimate Loss Ratios by Policy Year Actuarial Claims as a % of Net Statutory Premiums Written – U.S. Operations Only Source: ALTA, Family - Company Aggregates Stewart First American Fidelity Claims Paid
Slide 21: Market Conditions
21 Market Conditions Positives • Housing sales continuing recovery with estimated 5 percent increase in total new and existing sales in 2014 • Home prices increasing – a 5 percent rise in home prices increases revenue per transaction in the mid - 3 percent range • Interest rates remain at historical
Slide 22: U.S. Existing Housing Sales
22 0 1 2 3 4 5 6 7 8 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 U.S. Existing Housing Sales Seasonally Adjusted Annualized Rate – Millions $8,000 Tax Credit Normal Market Bubble Fannie Mae ® October 2013 National Association of REALTORS ® Last Normal Market in 2002
Slide 23: 2014 Strategic Priorities
23 2014 Strategic Priorities • Lead the market in providing compliant, trusted and tailored real estate services in concert with changing regulatory environment • Repositioning Mortgage Services to excel in a normalized market • Expanding footprint of direct operations, primarily in western states •
Slide 24: Management and Investor Relations Contacts
24 CEO Matt Morris CFO Allen Berryman Ted C. Jones, PhD Chief Economist Director of Investor Relations ted@stewart.com 713.625.8014 direct 800.729.1900, extension 8014
Slide 25: Winter 2013 Appendix
Winter 2013 Investor Presentation Appendix Stewart Information Services Corporation
Slide 26: Residential Lending vs. Industry Premiums Forecast
26 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 $3 $5 $7 $9 $11 $13 $15 $17 Residential Lending Vs. Industry Premiums Forecast Fannie Mae ® October 2013 2011 - 2014 Lending Likely Understates Title Revenues Due to Cash Sales Double Normal Effective Lending –
Slide 27: Stewart Net Operating Revenues Trailing Months
27 Stewart Net Operating Revenues Trailing 12 Months - $ Millions $0 $250 $500 $750 $1,000 $1,250 $1,500 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Direct Title Agency Net of Retention Mortgage Services
Slide 28: Title Revenues by Regulatory Oversight
28 Title Revenues by Regulatory Oversight Source: Form 9 filings (Schedule T) as compiled by ALTA
Slide 29: Claims Expense vs. Cash Claims
29 $25 $75 $125 $175 $225 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 Claims Expense Vs. Cash Claims Trailing 12 Months - $ Millions Anticipate accruals of 5.5% - 6.5% by year - end 2013, including large claims Claims Expense Cash Claims Paid (Net of Recoveries)
Slide 30: Employee Expenses As a Percentage of Operating Revenues
30 Employee Expenses As a Percentage of Operating Revenues Trailing 12 Months 20% 25% 30% 35% 40% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Slide 31: Other Operating Expenses As a Percentage of Operating Revenues
31 Other Operating Expenses As a Percentage of Operating Revenues Trailing 12 Months 10% 13% 15% 18% 20% 23% 25% '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
Slide 32: Statutory Surplus and Operating Leverage
32 Statutory Surplus and Operating Leverage Thousands Multiple
Slide 33: Debt-to-Capital and Debt-to-Equity
33 Debt - to - Capital and Debt - to - Equity
Slide 34: Book Value and Tangible Book Value Per Share
34 Book Value and Tangible Book Value Per Share
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